How this site computes the PEG ratio
Last updated October 22, 2026. Thresholds below are the ones the code uses today.
The PEG ratio is a stock's P/E divided by its earnings growth rate, Peter Lynch's test of growth at a reasonable price: a fairly priced company's P/E roughly equals its growth, so a PEG near 1 reads as fair. This site reads under 0.9 as under fair and above 1.1 as above fair, and its screener passes a stock only with a PEG under 1.5.
What is the formula?
PEG = P/E ÷ earnings growth rate (in percent a year)
Turned around, the growth a price assumes is P/E ÷ PEG. A P/E of 30 with a PEG of 1.5 is a price that assumes 20% a year. See PEG ratio in the glossary and what growth does a share price imply for the same idea on a DCF.
How does this site read a PEG?
| PEG | Band | Reading |
|---|---|---|
| Under 0.5 | Well under fair | Half as expensive as its growth would justify |
| 0.5 to 0.9 | Under fair | Priced below its growth |
| 0.9 to 1.1 | About fair | Lynch's fair value of 1, with a margin so 1.0 is not called expensive |
| 1.1 to 2 | Above fair | Priced above its growth |
| 2 and above | Well above fair | Twice as expensive as its growth would justify |
The 0.5 and 2 marks and the 0.9 to 1.1 band are a reading aid, not rules Lynch gave. The screener's own filter is a PEG under 1.5, and the fair-price lens on Compounders at a Fair Price uses the same bar.
Where does the data come from, and what is left out?
P/E and PEG come from the weekly screener run (Finnhub fundamentals). Where Finnhub has no PEG, this site estimates it as trailing P/E ÷ the 5-year EPS growth rate from the same data and marks it as estimated, so you can tell the two apart.
A stock with a missing, zero or negative PEG, or without a positive P/E, is not ranked: that is a company with falling or negative earnings, not a cheap stock. The PEG ranking counts how many were left out and why.
What are the limits?
PEG uses one growth number, usually looking backward, and growth rarely stays at its recent pace. It ignores debt, cash, profit quality and how long the growth can last, and it misleads on cyclical companies whose earnings swing. A low PEG can mean the market doubts the growth, not that it missed it. Read it next to the checks that cover those gaps.
Frequently asked questions
What is a good PEG ratio?
Around 1 reads as fair on Lynch's rule of thumb, and this site reads under 0.9 as under fair and above 1.1 as above fair. What counts as good depends on how reliable the growth is.
Why is a PEG negative or missing?
PEG divides by earnings growth, so falling or negative earnings give a negative or undefined result. This site leaves those stocks out of the ranking and counts them separately.
What does an estimated PEG mean?
Finnhub did not report a PEG for the stock, so it is computed here as trailing P/E divided by the 5-year EPS growth rate, from the same real numbers, and marked as estimated.